Ripple Wins Some, Loses Some, As The SEC Lawsuit Continues
Ripple’s attorney Jeremy Hogan on behalf of the payment giant recently filed a “motion to compel responses to interrogatories” in which they ask the SEC to clarify whether Ethereum’s ETH is considered a security.
Jeremy Hogan pointed out that this line of questioning is an “AMAZING” move, in that, regardless of the answer given, the SEC will weaken their case.
Busy at work yesterday so I missed this AMAZING filing from Ripple – its Motion to Compel responses to Interrogatories.
For e.g.: Ripple asks the question we have asked to Chair Gensler – "Is Ether a security?" and they haven't yet but I believe the SEC will be FORCED to answer. pic.twitter.com/L3X6wJ9bkl
Just last month, at the Aspen Security Forum, SEC Chairman Gary Gensler would not give an answer to the same question. Gensler’s answer or better yet, the lack of it, would indicate that the SEC does not wish to expose itself any further.
Now that the same question is being asked in a formal court setting, the SEC is somewhat forced to providing a response.
Ripple Lawsuit with SEC
The SEC filed a lawsuit against Ripple in December before Christmans last year. The SEC accused Ripple of having engaged in $1.3 billion of illegal securities sales since 2013.
During the discovery phase that followed and is still ongoing, Ripple’s legal team has built a defense on multiple aspects, chief of which is the fair notice defense.
Ripple’s defense argues that the company was under the assumption that XRP, Bitcoin, and Ether were classed as equivalents in the eyes of the SEC.
Given that former SEC Director William Hinman had previously said neither Ether nor Bitcoin fit the bill as securities, Ripple presumed the same regarding XRP. Also, the SEC did not give fair notice otherwise, leaving Ripple unaware of breaching applicable securities law.
SEC has conveyed Hinman’s approval of Ether/Bitcoin as only a ‘personal opinion’ and should not have been construed as a stance held by the regulator.
The whole admission has now opened up a can of worms. Point being that if ETH is considered a security, why were they allowed to operate without impediment? And, if not, on what grounds has the SEC singled out Ripple?
Win-Win for Ripple
Hogan points out that taking a formal stance on Ether’s securities status puts the SEC in a difficult spot, no matter how they answer.
“If the answer is “no,” then it opens the door for Ripple to compare XRP to Ether. And as we know, only Ethereum had an ICO…
“Yes,” is not a politically fathomable answer for the SEC.”
The answer to this question "Is Ether a security?" is so difficult for the SEC.
If the answer is "no," then it opens the door for Ripple to compare XRP to Ether. And as we know, only Ethereum had an ICO…
"Yes," is not a politically fathomable answer for the SEC.
Though Ripple initially provided some documents to the SEC, it also refused to deliver Slack records and some other communications in August. It argued that doing so would “likely take months to complete and come at very significant cost.”
Ripple argued that collecting those records could cost Ripple $10 million.
The judge presiding over the case, Judge Sarah Netburn, stated that these costs are “outweighed by [Ripple’s] previous agreement to produce the relevant Slack messages,” as well as the amount of funds it has at hand and the amount at stake in the case.
It is not clear whether Ripple will attempt to challenge the demands a second time, or if doing so is possible.
An end date for the case is still not clear. The case’s fact discovery period, initially set to end on August 31, has been extended. Most estimates suggest that the case will continue into 2022.
